Cooling rental growth spells relief for us tenants

Photo: JeffGunn

Rental growth in the US is forecast to cool in the coming year, spelling relief for cash-strapped tenants.

National median rent in the US at the end of 2015 was $1,381, with some of the fastest growing metros recording double-digit annual increases - a rise that placed a large deal of pressure on tenants' budgets. With renters in some markets spending almost half of their income on rent, the affordability crisis has held them even further back from being able to buy their own property.

Rents in San Francisco saw 12.5 per cent appreciation in 2015, for example.

Zillow's latest research, though, predicts good news for renters, as monthly rates are expected to level off in the coming year.

The slowdown is expected to be strongest in Nashville, Tenn., Portland, Ore. and Denver, as well as San Francisco. In the latter, rents will grow just 5.9 per cent, half the rate recorded in 2015.

Annual growth will slow to 1.1 per cent by December 2016, with median rents projected to be $1,396, only slightly higher than the current level. It will be driven by rising supply, as the stock of new multi-family homes begins to catch up to demand.

Even with the slowdown, though, rents will remain unaffordable in many of the major markets across the US, especially on the West Coast. Renters in San Francisco and Los Angeles can expect to spend 40 per cent of their income on a rental payment, cautions Zillow.

"Hot markets are still going to be hot in 2016, but rents won't rise as quickly as they have been," says Zillow Chief Economist Dr. Svenja Gudell. "The slowdown in rental appreciation will provide some relief for renters who've been seeing their rents rise dramatically every single year for the past few years. However, the situation remains tough on the ground: rents are still rising and renters are struggling to keep up."